The Reserve Bank of India has recently declared that it would increase the repo rate by 25 basis points (bps) to an amount of 6.50 percent.
The decision made by the RBI is being seen as a "win-win" offer for the markets as well as the banks. The reason is that the inflation is being speculated to reduce to sub-5 percent in future.
This information has been provided by the Economic Research Department of State Bank of India (SBI).
The Chief Economic Adviser of SBI, Dr. Soumya Kanti Ghosh talked about the same and asserted, "The Monetary Policy Committee (MPC) decided to increase repo rate by 25 bps (for the second time in a row) to 6.50 percent by the 5-1 vote and kept the stance neutral. RBI had to choose the timing of rate hike between now and later in the October 2018 policy. However, RBI decided to walk the talk and the rate hike is a win-win situation for both markets and the banks as inflation is expected to rapidly decelerate to sub-5 percent in coming months and it would have been difficult for RBI to hike then and convince the markets."
The officials also informed that the private agencies shall be forecasting the weak rainfall in the months of August and even September.